Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
100% in the S&P 500 is not a sound investment strategy. The S&P is a weighted index so if you invest $500 you don't have $1 go to each of the 500 stocks in the index. You will have $7 in the largest then 6$ in the next few adn so on down the line.

It's worse than that. GE and Microsoft were 4% to 3.5% of the index (each) last time I checked. So, of the $500, MSFT and GE would be at $17 to $20.

The S&P500 can be the biggest chuck of your asset allocation if you're going for growth, i.e., accumlating assets (vs., say, protecting/withdrawing). However, that only gets you large-caps. You also need small cap US stocks, and international stocks, plus cash and/or bonds to be truly diversified.

I don't go for the "5% in real estate or emerging markets" idea, since that's just in the noise ratio. You have to double your 5% position to make up for a 10% change in your 50% position.
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.